The toy maker LEGO has pledged to the German Cartel Commission that it will organise its rebate system in such a way that retailers can achieve the same level of discounts via online sales as they can in bricks-and-mortar shops. The German Cartel Commission initiated legal proceedings after complaints from online merchants. These proceedings were halted following cooperation from LEGO.

The discount level offered by manufacturer LEGO is crucial for the retailer’s purchase price. Previously, retailers could only benefit from the highest discount points through sales in bricks-and-mortar shops, since the amount of available shelf space was one of several qualifying criteria for the discounts. Since most criteria were tailored to the bricks-and-mortar shops, even the most active and successful online merchants could rarely achieve discounts as low as those offered to retailers working exclusively from bricks-and-mortar shops.

“The company will no longer offer this unequal treatment. LEGO will inform all dealers separately about the changes to the discount system,” reads the German Cartel Commission’s press release dated 18 July 2016.

LEGO is selling the new rules as a success for the company. In a press release, the LEGO Group thanked the German Cartel Commission for the constructive exchange. According to LEGO, the updated criteria will not only offer more legal certainty, but they will also reflect the latest developments in the sector’s market environment. The new discount system does not affect the recommended retail prices for the end consumer. However, market observers believe that online platforms will probably offer price reductions on LEGO products.

“A manufacturer is naturally allowed to make demands concerning the quality with which its products are sold, and to offer different discounts to its dealers,” explains Andreas Mundt, President of the German Cartel Commission.
“However, this must not take place in such a way that online trading, as a distribution channel, is structurally disadvantaged.” Many retailers now follow a two-pronged strategy, seeking to win new customers through bricks-and-mortar shops as well as through online shops. These business models must thus be facilitated in order to support the bricks-and-mortar shops too.

The competition authorities have repeatedly warned manufacturers from various industries not to disadvantage online retailers. The companies concerned wish to keep the value of their brands high.

Featured Image: © LEGO